Local AC makers now eye global market
Once an entirely import-dependent market, today, not only are foreign companies assembling their ACs here, but a plethora of local manufacturers have also entered the market
Bangladesh's local AC market has grown exponentially over the last decade or so thanks to rising heat, the rise of the middle class, the affordability of AC prices, and the advancement of the rural economy.
In 2020, 3 lakh ACs were sold; while last year, saw the sales of 5.5 lakh units. Industry insiders predict that this figure will surpass 6.5 lakh this year.
The local air conditioner market is expected to expand, with a projected 25% compound annual growth rate (CAGR) for 2023–27. The Global Air Conditioners Market was valued at USD 105.33 Billion in 2022 and is anticipated to project robust growth in the forecast period with a CAGR of 4.05% through 2028. Local AC manufacturers are eyeing a piece of this pie.
Electromart manufactures and markets Gree, the country's best-selling AC brand. Their Deputy managing director, Nurul Afsar, Electro Mart, said, "This surge in the AC market is attributed to a combination of factors, including global warming, uninterrupted electricity supply in the country, decreasing AC prices, the emergence of skilled labour and technology, and the rise of a new middle class. AC sales have increased significantly in recent years."
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He also spoke about how they have vastly expanded their production capacity and plan to export their products in the near future. According to him, all they need is a little policy support like bonded warehouse facilities, back-to-back LC facilities etc.
Industry insiders say the current size of the AC market in Bangladesh is Tk600 crore. Among the ACs sold in the market, some popular brands include Gree, Walton, Media, Haier, Singer, Vision, Orion, Panasonic, Daikin, LG, Samsung, Sharp, General, Toshiba, and Whirlpool. More than 6 lakh ACs are sold annually.
Over 80% of the ACs sold are now manufactured in the country. Bangladeshi companies are producing ACs for almost all foreign companies. Local companies like Walton, Vision, Orion, and Minister have also captured a significant chunk of the market.
From import to manufacturing
The AC market was once entirely import-dependent. At first, AC imports began from China. Later, importers started importing from Japan, Korea, and Taiwan.
In 2004, Electromart Limited became the first Bangladeshi company to start assembling ACs using imported components in a joint venture with Chinese home appliance manufacturer Gree. At that time, the peak demand for ACs was 30,000 units.
Gradually, many importers in the country started marketing ACs by assembling them locally, using spare parts imported from China and other countries. In the meantime, several domestic companies set up electronics factories in the country. Some of them started with refrigerators. Later, AC manufacturing and assembly facilities were also established in those factories.
Entrepreneurs say that since 2020, local companies such as Walton, Minister-MyOne, Jamuna, and Vision have made significant investments in AC assembly and manufacturing. During this time, foreign brands have also invested in Bangladesh due to various government incentives, including VAT exemption and tax breaks for manufacturing.
In 2020, Electro Mart established a full-fledged manufacturing plant with the goal of producing environmentally friendly and energy-efficient ACs. The company currently produces 80 models for residential and commercial customers. The company's annual production capacity is 3 lakh units per year.
Nurul Afsar of Electro Mart said, "We have convinced the government that reducing taxes will increase investment and employment in the country. As a result, we have been able to provide people with products at lower prices. This has led to a growing demand for our products."
Walton, one of the largest AC manufacturers in the country, has an annual production capacity of 2 lakh units. Vision Electronics, a company of the Pran-RFL Group, has an annual production capacity of approximately 50,000 units of ACs.
Fair Electronics is now manufacturing Hisense ACs, a popular consumer electronics brand worldwide, in Bangladesh. The company's officials have said that they will produce at least 70,000 units of ACs this year.
Mesbah Uddin Ahmed, chief marketing officer at Fair Group, said, "Due to climate change and the emergence of the middle class, there has been an increase in demand for ACs in the country. The government is also reducing prices to encourage consumption. We expect to have over 10% market share in the coming year."
Country's AC market
According to industry sources, the Gree brand has a market share of over 25% in the country. In second place is the domestic electronics giant Walton. The company currently holds 22-23% of the market. In third place is another Chinese brand, Media. The company has a market share of around 15%. The Haier brand has a 10% market share.
In addition, brands like Singer, General, Vision, Eco Plus, Samsung, LG Butterfly, Jamuna, Hitachi, Panasonic, and Orion are also well-positioned in the market. Hisense has also started business in the Bangladesh AC market this year.
Machinery is also being manufactured locally
Not only is Bangladesh producing ACs domestically, but domestic electronics giant Walton is now manufacturing almost all of the components of ACs, except for the compressor.
The main components, such as the main circuit, indoor-outdoor plastic frames, and copper cables, are manufactured domestically. Local manufacturers also supply the wires inside the AC. However, some components still need to be imported.
Tanvir Rahman Sajib, chief executive officer at Walton Air-Conditioner, said the price of ACs has also decreased due to the domestic production of many raw materials. "We are planning to manufacture compressors in the future. Once that is done, we will not have to import any more raw materials."
Opportunity for export
In order to survive the competition in the current market, local companies are adhering to international standards. As a result, companies are seeing good export potential for ACs made in Bangladesh. Some are sending some on a trial basis to some countries.
However, some government policy benefits like bonded warehouse facilities, back-to-back LC facilities, and duty benefits for raw materials that exist in the readymade garment industry are needed for that, say industry insiders.
Mesbah Uddin Ahmed of Fair Group said, "The global AC market is worth around $150 billion. Bangladesh has the potential to capture a share of the market if it can get some benefits. For this, policy support and incentives need to be provided."
SM Mahbubul Alam, managing director of Walton High-Tech Industries PLC, said, "Walton's OEM (original equipment manufacturer) ACs are being exported to various countries in Asia, the Middle East, and Africa. We are working to expand the export market to Europe, America, and Australia. We have formed a skilled and attentive global business team. Besides, subsidiaries and branch offices have been established in several countries."
Vision AC manufactured by Pran-RFL group is also being exported. " Vision AC exports began in 2022. Currently, Vision ACs are regularly exported to various countries worldwide, including Vanuatu, Fiji, Guinea, Djibouti, and Sierra Leone. Due to the overwhelming response in the export market, we have decided to expand our export activities further. As part of this, there are plans to export ACs to all countries in India and the African continent in the future," said Kamruzzaman Kamal, Marketing Director, Pran-RFL Group.
